Azure Global : Libor scandal

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Thursday, 31 October 2013

Barclays assisting with investigation into currency market manipulation

Regulators request foreign exchange activity information from Barclays in investigation that could match scale of Libor scandal

Barclays is involved in the new investigation by global regulators into the potential manipulation of the £3tn-a-day currency markets, in a fresh setback for the bank as it attempts to clean up its reputation in the wake of the Libor rigging scandal.

As it published its third quarter financial results, Barclays disclosed that it has received official requests for information about its foreign exchange activities. Barclays is joining a number of other banks – including Royal Bank of Scotland, Deutsche Bank and UBS – in co-operating with the authorities and also shedding light on the nature of the investigation by regulators in the UK, the US and Asia.

RBS said it was already reviewing its processes in the foreign exchange markets.

Barclays also confirmed it is continuing to contest a £50m penalty from the Financial Conduct Authority for behaving recklessly in the way it raised funds from Qatar to avoid a taxpayer bailout in 2008.

The foreign exchange investigations are at an early stage and could be on the scale of the Libor scandal. Barclays was the first bank to be fined for rigging the key interest-rate benchmark, in June 2012, and was handed a fine of £290m. That led to the departure of its chief executive,Bob Diamond, and the promotion of Antony Jenkins, who has since embarked on a strategy to restore the reputation of the bank through his so-called transform programme.

Jenkins used the results to outline a vision for more technology at the bank – which, it is suggested, could lead to 40,000 job cuts – and said that he was embarking on a new review of the bank's 75 business lines to gauge the riskiness of the operations.

Last month the bank was forced to tap shareholders for £6bn to bolster its financial strength. Jenkins said the new finance director Tushar Morzaria, who joined a fortnight ago, would reassess each business line to assess how much capital they are using.

He refused to elaborate on the bank's legal disclosure that regulators are investigating foreign exchange trading "including possible attempts to manipulate certain benchmark currency exchange rates or engage in other activities that would benefit their trading positions".

The bank said: "The investigations appear to involve multiple market participants in various countries. Barclays has received enquiries from certain of these authorities related to their particular investigations, is reviewing its foreign exchange trading covering a several-year period through August 2013 and is co-operating with the relevant authorities in their investigations."

The investigations emerged after reports of allegations that traders at major banks were putting in client orders before a 60-second window when benchmarks run by WM/Reuters – and used by fund managers to value their investments – are set.

Jenkins said his new team – as well as a new finance director, he has a new retail head and new bosses of the investment bank – needed to "push harder" in the final quarter of the year and into 2014.

After being forced into the cash call by the Bank of England, Jenkins said the bank was continuing to "reassess the balance sheet for further leverage reduction opportunities consistent with preserving our strong franchises, supporting lending to the UK economy".

When he took the helm he had originally assessed 75 business lines in terms of reputation risks and said he would withdraw from some businesses. The investment bank – the traditional powerhouse of the business and once known as Barclays Capital – took a hit to income as a result and also suffered a fall in its fixed-income trading. Third quarter profits in the investment bank fell 53% to £463m, although the bank did not disclose any reduction caused by shutting down the controversial tax planning department known as structured capital markets.

Overall, in the third quarter, profits fell to £1.4bn from £1.9bn as losses in continental Europe widened. In the first nine months of the year Barclays's profits rose to £2.8bn from £962m, although this included the cost of buying back its own debt. The shares rose 3.5% to 274p in early trading.

Barclays is in discussions with its shareholders about ways to avoid an EU cap on bonuses being introduced by the EU at the start of next year by introducing a new allowance for its highest paid staff. It said the closely-watched compensation to income ratio at its investment bank – measuring what proportion of its income it was paying out to its staff – had risen to 41% from 40% and remains above its target of 35%.

Article Source : http://www.guardian.co.uk
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Tuesday, 29 October 2013

Rabobank faces £600m fine as Libor scandal resurfaces

Dutch mutual expected to become fifth financial institution to face huge penalty for attempting to rig benchmark interest rate

The Libor rigging scandal could be reignited on Tuesday when Dutch mutual Rabobank is expected to become the fifth financial institution to be hit with a huge fine for attempting to rig the benchmark interest rate.

The bank is thought to be facing fines of more than £600m from regulators on both sides of the Atlantic, who are continuing their investigations into alleged manipulation of the key interest rate.

London's Financial Conduct Authority (FCA) and regulators in the US are thought to be poised to levy larger than expected penalties on Rabobank, a co-operative-style institution whose roots lie in financing agriculture and which escaped the financial crisis without a taxpayer bailout.

The bank has been warning that it faced a fine for Libor rigging since the summer when it revealed it had made a provision of an undisclosed sum in preparation for the regulatory action.

The Libor scandal was first exposed in June 2012, when Barclays was fined £290m for its role in attempting to manipulate the rate; its top management was subsequently forced out. Since then Royal Bank of Scotland, Swiss bank UBS and the money broker Icap have been fined. UBS received the highest penalty of £940m.

Rabobank said last week that details of its punishment were getting closer to publication. "Various authorities have almost completed their investigation into Rabobank's role in the Libor and Euribor setting process," the bank said. "Rabobank expects to be able to enter into settlements with these authorities within the next two weeks. Rabobank is not yet in a position to comment on possible settlement amounts."

When it took a provision for Libor, it said it had been named as defendant in civil litigation in the US and that it would defend itself against any such claims.

At the time of the fine against Barclays City regulators said they were investigating seven other potential cases, which appears to indicate there are still three outstanding.

The regulator declined to comment on Monday night and Rabobank declined to elaborate on its previous statements.

Since the Libor scandal broke regulators have begun to scrutinise the way other benchmarks are set, such as those in the foreign exchange markets.

Earlier this month the FCA began an investigation that is expected to be on the scale of Libor after gathering information on the £3tn-a-day currency markets. The regulators are looking at the way traders may have been able to influence the way currency benchmarks are set and scrutinising the way energy markets operate.